Analysis Industry Description
This is a competitive industry with various companies, such as Redbox, Blockbuster, and Netflix, trying to differentiate themselves from others. Redbox offers low cost movie ($1 per night) and will expand its number of rental kiosks to almost 20,000 by the end of 2010. Netflix offers various rental options such as quick-turnaround mail-order rentals and online rentals. Blockbuster has recently entered online streaming services and installed its own rental kiosks in 2009 resulting in a hybrid physical-mail rental service. Local movie rental stores still operate and compete by offering low rental fees and extended rental periods. Public libraries also offer free video rentals. Entering the Industry
Our recommendation is to not enter the movie rental business unless an organization focuses on online video renting and convenient services. There would be challenges to offering a significant difference in price from existing competitors as well as reaching the scale of Redbox’s kiosk network. However, a new entrant could focus on offering more convenient services such renting and reserving movies via mobile technologies and social networking sites, high quality video downloads, rental kiosks in high-traffic locations other than grocery stores (such as airports), and offering videos through new mediums (i.e. Xbox, Play Station and Wii).
Threats of New Entrants
Dominance of existing players in the market (i.e. NetFlix, Redbox, Blockbuster)
Cost of entering market is high
Rapid changes in technology and new media
The reach of services and scale of kiosk networks of existing players
Decreasing marginal returns
Competitive pricing
Netflix patents (mailing and response envelope, renting online, user ratings)
Rivalry Among Competitors
Physical stores or physical locations of kiosks
Mail ordering
On demand streaming
Pricing
Length of rental periods
Zero to minimal late fees
Number of available products (i.e.-long wait times for new releases)
Quality of movies
Download time
Threat of Substitute Products or Services
Video on-demand services through cable and satellite operators
Illegal movie downloads and video piracy
VHS-DVD-BlueRay
Free online movie sites like Hulu, Internet Movie Database, YouTube
Pay per view
Movie Theaters
Supplier Power
Households with computers or mobile devices provide a large market for these services
The more movies released for rent, the smoother the industry
Supplier agreements with companies like Sony Pictures, Universal and MGM
Movie studios selling movies to multiple movie rental companies
Buyer Power
Different choices available
Knowledge of $1 rentals (in some locations)
Free online movie sites like Hulu, Internet Movie Database, YouTube
Analysis
Industry Description
This is a competitive industry with various companies, such as Redbox, Blockbuster, and Netflix, trying to differentiate themselves from others. Redbox offers low cost movie ($1 per night) and will expand its number of rental kiosks to almost 20,000 by the end of 2010. Netflix offers various rental options such as quick-turnaround mail-order rentals and online rentals. Blockbuster has recently entered online streaming services and installed its own rental kiosks in 2009 resulting in a hybrid physical-mail rental service. Local movie rental stores still operate and compete by offering low rental fees and extended rental periods. Public libraries also offer free video rentals.
Entering the Industry
Our recommendation is to not enter the movie rental business unless an organization focuses on online video renting and convenient services. There would be challenges to offering a significant difference in price from existing competitors as well as reaching the scale of Redbox’s kiosk network. However, a new entrant could focus on offering more convenient services such renting and reserving movies via mobile technologies and social networking sites, high quality video downloads, rental kiosks in high-traffic locations other than grocery stores (such as airports), and offering videos through new mediums (i.e. Xbox, Play Station and Wii).
Threats of New Entrants
Rivalry Among Competitors
- Physical stores or physical locations of kiosks
- Mail ordering
- On demand streaming
- Pricing
- Length of rental periods
- Zero to minimal late fees
- Number of available products (i.e.-long wait times for new releases)
- Quality of movies
- Download time
Threat of Substitute Products or Services- Video on-demand services through cable and satellite operators
- Illegal movie downloads and video piracy
- VHS-DVD-BlueRay
- Free online movie sites like Hulu, Internet Movie Database, YouTube
- Pay per view
- Movie Theaters
Supplier PowerBuyer Power